FERS

Federal Employees
Federal EmployeesRetirement
RetirementSystem
System
(An Overview of Your Benefits)
(An Overview of Your Benefits)

United States Retirement and

Office of Insurance
Personnel Service
Management
RI 90-1
Previous edition is usable. Revised April 1998
 This booklet contains highlights of the Federal Employees Retirement
System (FERS). It is not meant to provide a detailed explanation of all
the plan provisions. The information is based on the law in effect at
the time the booklet went to publication.

Under the Balanced Budget Act of 1997, Public Law 105-33 for fiscal
year 1998, employee retirement contributions will increase as follows.
Deductions for the Civil Service Retirement System and the Federal
Employees Retirement System would be increased by 0.25% in January
1999, by an additional 0.15% in January 2000, and by 0.1% more in
January 2001, for a total increase of 0.5%. These higher contribution
rates would be in effect through 2002.

Additional retirement information and all publications of the U.S. Office of

Personnel Management listed in this pamphlet are available on the Internet.

OPM Website — http://www.opm.gov/asd

For sale by the U.S. Government Printing Office

Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

ISBN 0-16-045533-2
Table of

Contents
Introduction . . . . . . . . . . . . . 1
Thrift Savings Plan . . . . . . . 12

Eligibility

Overview . . . . . . . . . . . . . . . . 2
Contributions

The Components
Agency Automatic (1%)

Social Security Benefits

Contributions
Basic Benefit Plan
Employee Contributions
Thrift Savings Plan
Agency Matching Contributions
Social Security Benefits . . . . 3 Vesting Requirement
Investment Options
What is Social Security?

Government Securities
Social Security Benefits

Investment (G) Fund

Social Security Taxes

Common Stock Index

Basic Benefit Plan . . . . . . . . . 5
Investment (C) Fund
Eligibility Participation
Fixed Income Index
Vesting
Investment (F) Fund
Creditable Service
Contributing to TSP
Contributions
Tax Advantages
Refunds
Loan Program
Retirement Options
Withdrawing Your Funds
Immediate or Postponed
Withdrawal Options
Early
Leaving Your Money in the TSP
Deferred
Automatic Cashout
Benefit Formula
Additional Information
Special Retirement Supplement
Special Groups of
Survivor Benefits
Employees . . . . . . . . . . . 17
Spouse

Firefighters, Law Enforcement

Former Spouses
Officers, and Air Traffic Controllers
Children
Military Reserve Technicians
Disability Benefits
Part-Time Employees
What Does Disability Mean?
Members of Congress, and
Eligibility
Congressional Employees
The Benefits

Cost-Of-Living Adjustments (COLA’s) Enrolling in FERS . . . . . . . . 19

Form of Payment New Employees

Rehires and Conversions

Examples . . . . . . . . . . . . . . 21

For More Information . . . . . 26

i
Introduction

R etirement. . . a time for reflection, rest, and enjoyment . . . a rewarding time.

But, a rewarding retirement doesn’t just happen. It takes careful planning.
Knowing when you can retire and where you will stand financially are important
parts of that planning process. The financial security you will have in the future
depends, in part, on the plans you make today.

Recognizing the importance of your future, the Federal Government offers a retire­
ment program that helps provide financial security for you and your family. You
are a participant in the Federal Employees Retirement System (FERS). This is
one of the most important benefits you receive as a Federal employee.

FERS is a retirement system that is responsive to the changing times and Federal
work force needs. Many of its features are “portable,” so that if you leave Federal
employment, you may still qualify for the benefits. FERS is flexible; you will be
able to choose what is best for your individual situation. And FERS enables you to
take an active role in securing your future.

This booklet highlights the main features of the Federal Employees Retirement Sys­
tem (FERS).

1
Overview
The Federal Employees Retirement Sys­
tem, or FERS, became effective January
1, 1987. Almost all new employees
hired after December 31, 1983, are
automatically covered by FERS. Certain
other Federal employees not covered by
FERS have the option to transfer into
the plan.
The Components
FERS is a three-tiered retirement plan.
The three components are:
[ Social Security Benefits
[ Basic Benefit Plan
[ Thrift Savings Plan
2
You pay full Social Security taxes and a
small contribution to the Basic Benefit
Plan. In addition, your agency puts an
amount equal to 1% of your basic pay
each pay period into your Thrift Sav­
ings Plan (TSP) account. You are able
to make tax-deferred contributions to
the TSP and a portion is matched by
the Government.
The three components of FERS work
together to give you a strong financial
foundation for your retirement years.
Social Security
Benefits

The first part of your benefit is Social Social Security Benefits

Security.
Social Security programs provide:
What is Social Security? [ Monthly benefits if you are retired
and have reached at least age 62,
The term “Social Security” means bene­
and monthly benefits during your
fit payments provided to workers and
retirement for your spouse and
their dependents who qualify as benefi­
dependents if they are eligible;
ciaries under the Old-Age Survivors,
and Disability Insurance (OASDI) pro­
grams of the Social Security Act. OASDI
[ Monthly benefits if you become
totally disabled for gainful employ­
replaces a portion of earnings lost as a
ment and benefits for your spouse
result of retirement, disability, or
and dependents if they are eligible
death. It is designed to provide benefits
during your disability;
that replace a greater percentage of
earnings for lower-paid workers than
for higher-paid workers. This means
[ Monthly benefits for your eligible
survivors; and
that Social Security benefits are more
important for lower-paid workers than
higher-paid workers.
[ A lump sum benefit upon your
death.
As an employee with FERS coverage,
To become eligible for benefits, you and
you have Social Security coverage. You
your family must meet different sets of
also are covered under Social Security’s
requirements for each type of benefit.
Medicare Hospital Insurance program.
An underlying condition of payment of
This pays a portion of hospital
most benefits is that you have paid
expenses incurred while you are receiv­
Social Security taxes for the required
ing Social Security disability benefits or
period of time.
retirement benefits at age 65 or older.

3
The amount of monthly benefits you
receive is based on three fundamental
factors:
[ Average earnings upon which you
have paid Social Security taxes,
which are adjusted over the years
for changes in average earnings of
the American work force;
[ Family composition (for example,
whether you have a spouse or
dependent child who may be eligi­
ble for benefits); and
[ Consumer Price Index (CPI) changes
that occur after you become entitled
to benefits.
Benefits are subject to individual and
family maximums.
Once benefits begin, their continuation
may depend upon your meeting a vari­
ety of conditions. For example, if you
have earnings that exceed specified
amounts while you are under age 70,
your Social Security benefits will be
reduced or stopped. There are special
Social Security rules that may affect
the benefits of Federal employees,
including the Federal Employees Retire­
ment System (FERS) participants. If
you previously had some service that
was covered by the Civil Service Retire­
ment System (CSRS) (or another similar
retirement system for Federal employ­
ees), your Social Security benefits may
be affected by the Windfall Elimination
Provision. If you transferred to FERS
and do not complete 5 years of service
under FERS, any spousal benefit you
are entitled to under Social Security
may be reduced because of the Govern­
ment Pension Offset. If you think either
of these provisions may affect your
4
benefits, ask your servicing personnel
office or local Social Security office for
copies of the factsheet, A Pension From
Work Not Covered by Social Security
(Publication No. 05-10045) and the
factsheet, Government Pension Offset
(Publication No. 05-10007). You may
also request these publications by call­
ing the Social Security Administration
on (800) 772-1213 or by downloading
from the Web at:
http://www.ssa.gov/pubs
Social Security Taxes
Most of the cost of Social Security is
paid for through payroll taxes. Each
year you pay a percentage of your sal­
ary up to a specified earnings amount
called the maximum taxable wage
base. The Federal Government, as your
employer, pays an equal amount. The
percentage you each pay for old age,
survivor, and disability insurance cov­
erage is 6.20% of your earnings up to
the maximum taxable wage base.
The maximum taxable wage base is
$68,400 in 1998. It increases automati­
cally each year based on the yearly rise
in average earnings of the American
work force.
The Social Security tax covers both the
Old Age, Survivors, and Disability
Insurance (OASDI) and Medicare Hospi­
tal Insurance programs. The Medicare
portion you and your agency each pay
is 1.45% of your total pay. All wages
are subject to the deduction for Medi­
care.
Basic Benefit
Plan
The second part of the Federal Employ­
ees Retirement System (FERS) is the
Basic Benefit plan.
Eligibility Participation
If you were automatically covered by
FERS, or you elected to transfer from
the Civil Service Retirement System
(CSRS) to FERS, you will participate in
the Basic Benefit plan.
Vesting
To be vested (eligible to receive your
retirement benefits from the Basic
Benefit plan if you leave Federal service
before retiring), you must have at least
5 years of creditable civilian service.
Survivor and disability benefits are
available after 18 months of civilian
service.
Creditable Service
Creditable service generally includes:
[ Federal civilian service for which
contributions have been made or
deposited.
[ Military service, subject to a deposit
requirement. To receive credit for
military service, generally, you
must deposit 3% of your military
base pay. Interest begins 2 years
5
after you are hired. With certain
exceptions, you cannot receive
credit for military service if you are
receiving military retired pay. Also,
see the note that follows on credit
for National Guard service.
[ Leaves of absence for performing
military service or while receiving
workers’ compensation.
Unused sick leave is not converted into
creditable service for any purpose.
(There is a limited exception for CSRS
employees who transfer to FERS.)
Credit is not allowed for civilian service
after 1988 when no contributions were
withheld.
Note: Service in the National Guard,
except when ordered to active duty in
the service of the United States, is gen­
erally not creditable. However, you may
receive credit for National Guard serv­
ice, followed by Federal civilian reem­
ployment that occurs after August 1,
1990, when all of the following condi­
tions are met:
[ The service must interrupt civilian
service creditable under the Civil
Service Retirement System (or
FERS) and be followed by reemploy­
ment in accordance with the appro­
priate chapter of the laws concern­
ing Veterans Benefits; and
[ It must be full-time (and not inac­
tive duty), and performed by a
member of the U.S. Army National
Guard, or U.S. Air National Guard;
and
[ It must be under a specified law
and you must be entitled to pay
from the U.S. (or have waived pay
from the U.S.) for the service.
The deposit for National Guard service
that meets these criteria is limited to
the amount that would have been
deducted from your pay for retirement
if you had remained in the civilian
service.
Contributions
[ Immediate, and Postponed
[ Early
[ Deferred
Eligibility is determined by your age
and number of years of creditable serv­
ice.
In some cases, you must have reached
the Minimum Retirement Age (MRA)
to receive retirement benefits. The fol­
lowing chart shows the MRA.
Minimum Retirement Age
If you were
Your MRA is:
born:

Your contribution to the Basic Benefit Before 1948 55

Plan is the difference between 7% of In 1948 55 and 2 months
your basic pay and Social Security’s old
age, survivor, and disability insurance In 1949 55 and 4 months
tax rate, or 0.80%.
In 1950 55 and 6 months
Refunds In 1951 55 and 8 months

You may withdraw your basic benefit 55 and 10

In 1952
contributions if you leave Federal months
employment. However, if you do, you In 1953 through
will not be eligible to receive benefits 56
1964
based on service covered by the refund.
There is no provision in the law for the In 1965 56 and 2 months
redeposit of FERS contributions that
have been refunded. In 1966 56 and 4 months
In 1967 56 and 6 months
Retirement Options
In 1968 56 and 8 months
There are three categories of retirement
benefits in the Basic Benefit Plan: 56 and 10
In 1969
months
In 1970 and
57
after

6
Immediate or Postponed Deferred

If you meet one of the following sets of If you leave Federal service before you
age and service requirements, you are meet the age and service requirements
entitled to an immediate retirement for an immediate retirement benefit,
benefit: you may be eligible for deferred retire­
ment benefits. To be eligible, you must
Age Years of service have completed at least 5 years of cred­
itable civilian service. You may receive
62 5
benefits when you meet one of the fol­
lowing sets of age and service require­
60 20
ments:

MRA 30
Age Years of service

MRA 10*
62 5

* (Reduced benefit unless postponed to 60 20

lessen or eliminate age reduction)
MRA 30

MRA 10*
Early * (Reduced benefit unless receipt
delayed to lessen or avoid age reduc­
The early retirement benefit is tion)
avail-able in certain involuntary
separation cases and in cases of volun­
tary separations during a major reor­
ganization or reduction in force. To be
eligible, you must meet the following
requirements:

Age Years of service

50 20

Any age 25

* Reduced benefits means if you retire at the minimum retirement age with at least 10 but less
than 30 years of service, your benefit will be reduced at the rate of 5/12’s of 1% for each month
(5% for each year) you are under age 62, unless you have 20 years of service and your annuity
begins at age 60 or later. You can avoid part or all of the reduction by postponing the commenc­
ing date of your annuity.

7
Benefit Formula
How your benefit is calculated:
Your benefit is based on your “high-3
average pay.” This is figured by averag­
ing your highest basic pay over any 3
consecutive years of creditable service.
Generally, your benefit is calculated
according to this formula:
1% of your high-3 average pay
times
years of creditable service
If you retire at age 62 or later with at
least 20 years of service, a factor of
1.1% is used rather than 1%.
To determine your length of service for
computation, add all of your periods of
creditable service, then eliminate from
the total any fractional part of a month
(less than 30 days).
Depending on the category of retire­
ment benefits you receive, your benefit
may be reduced as described in the
Retirement Options section. For exam­
ple, the total could be reduced if you
elect to retire at the minimum retire­
ment age before completing 30 years of
service.
Special Retirement
Supplement
If you meet certain requirements, you
will receive a Special Retirement Sup­
plement which is paid as an annuity
8
until you reach age 62. This supple­
ment approximates the Social Security
benefit earned while you were
employed by the Federal government.
You may be eligible for a Special
Retirement Supplement if you retire:
[ After the Minimum Retirement Age
(MRA) with 30 years of service;
[ At age 60 with 20 years of service;
or
[ Upon involuntary or early voluntary
retirement (age 50 with 20 years of
service, or at any age with 25 years
of service) after the U.S. Office of
Personnel Management determines
that your agency is undergoing a
major reorganization, reduction-in-
force (RIF) or transfer of function.
You will not receive the Special
Retirement Supplement until you
reach your MRA.
If you transfer to the Federal Employ­
ees Retirement System (FERS) from the
Civil Service Retirement System (CSRS),
you must have at least one full calen­
dar year of FERS-covered service to
qualify for the supplement.
If you have earnings from wages or
self-employment that exceed the Social
Security annual exempt amount
($9,120 in 1998), your Special Retire­
ment Supplement will be reduced or
stopped.
Survivor Benefits
The Basic Benefit Plan provides bene­
fits for survivors of Federal employees
and retirees.
Spouse
If you die while you are an employee...
If you are married, have 18 months of
civilian service, and die while you are
an active employee, your surviving
spouse receives:
A lump sum payment
plus
the higher of
1/2 of your annual pay rate at death
or
1/2 of your high-three average pay.
The lump sum payment, which
increases by cost-of-living adjustments
each year, is $21,783.34 in 1998.
If you had 10 years of service, your
spouse also receives an annuity equal­
ing 50% of your accrued basic retire­
ment benefit. These benefits are paid in
addition to any Social Security, group
life insurance, or savings plan survivor
benefits.
To be eligible for benefits, you and your
spouse must have been married for at
least 9 months, or there must be a
child born of the marriage, or your
death must be accidental.
If you die while you are a retiree...
A married retiree’s annuity is automati­
cally reduced to provide spouse survi­
vor benefits unless those benefits are
jointly waived in writing by the retiree
and the spouse before retirement.
9
Your annuity is reduced 10% to give
your surviving spouse:
An annuity of 50% of your
unreduced benefit
plus
a special supplemental annuity
payable until age 60, if your spouse
will not be eligible for Social Security
survivor benefits until age 60.
You and your spouse may choose
instead to have your annuity reduced
by 5% to give your spouse an annuity
of 25% of your unreduced benefit at
your death.
Separate provisions apply to spouses of
disabled annuitants.
Former Spouses
A former spouse may receive survivor
benefits as provided in a retiree elec­
tion or a qualifying court order.
Children
If you have 18 months of civilian serv­
ice and die while you are an active
employee, or if you have retired, your
children may be eligible to receive an
annuity. This benefit is payable to each
unmarried child:
[ up to age 18;
[ up to age 22 if a full time student;
[ at any age if the child became dis­
abled before age 18.
The amount of the the Federal Employ­
ees Retirement System (FERS) benefit
depends on the number of children and
if the children are orphaned. In 1998
the FERS surviving child benefit is
$344 per month per child for each of
three children; $413 if orphaned. The
total children’s benefit is reduced dol­
lar for dollar by any Social Security
children’s benefits that may be pay­
able.
Disability Benefits
FERS disability benefits can help you
replace part of your income if you are
unable to work for a prolonged period.
What Does Disability Mean?
You are considered disabled under
FERS if you are unable to perform use­
ful and efficient service in your posi­
tion because of disease or injury.
However, you will not be considered
disabled if you decline your agency’s
offer of a position which accommo­
dates your disability and is at the same
grade or pay level and is within your
commuting area.
You may also qualify for Social Secu­
rity disability benefits if you are unable
to work in any substantial gainful
activity.
Eligibility
To qualify for FERS disability benefits,
your disabling condition must be
expected to last at least 1 year, and
you must have at least 18 months of
creditable civilian service.
10
The Benefits
The first year:
60% of your high-3 average pay
minus
100% of any Social Security
disability
benefits to which you are entitled.
After the first year and until age 62, if
your disability prevents you from per­
forming your job and you do not qual­
ify for Social Security disability bene­
fits, your benefit will be:
40% of your high-3
average pay.
If you do qualify for Social Security
benefits, your FERS disability benefit
will be reduced by 60% of the Social
Security benefit to which you are enti­
tled. The resulting total you receive
from both FERS and Social Security
will be at least 40% of your high-3 plus
40% of your Social Security disability
benefits.
If your earned annuity rate (1% x high
3 average salary x years of service) is
higher than the above rates after the
reduction for Social Security, you will
receive the higher benefit.
When you reach age 62 your disability
benefit will be recomputed. Essentially,
you will receive the annuity you would
have received if you had not been dis­
abled, but had continued working until
age 62. For purposes of this recomputa­
tion, your average salary will be
increased by all FERS cost-of-living
adjustments that took effect while you
were receiving a disability annuity.
If you are a disability retiree under age The Special Retirement Supplement for
60 and your total income from work in retirees is not increased by COLA’s; the
a calendar year exceeds 80% of the cur­ supplement for survivors is increased
rent pay level of your former job, the by COLA’s.
disability benefits will be discontinued.
You also may be required to provide Form of Payment
proof periodically that you have not
recovered from your disability. FERS Basic Benefits are a monthly
annuity that is paid the first business
Cost-of-Living day of the month after it accrues. For
Adjustments (COLA’s) example, the payment for December is
made on January 2.
Survivors and disability retirees receive
a COLA regardless of their ages; how­
ever, disability retirees receiving 60% of
their average pay do not receive a COLA
during the first year. All other retirees
begin to receive COLA’s at age 62.

The amount of the annual COLA per­

centage is based on the increase in
the Consumer Price Index (CPI):
Annual COLA
Increase in CPI
Percentage
Same as CPI
Up To 2%
increase
2% to 3% 2%
CPI increase
3% or more
minus 1%

11
Thrift Savings
Plan
The third part of your Federal Employ­
ees Retirement System (FERS) benefit
is the Thrift Savings Plan (TSP). The
TSP is a tax-deferred retirement sav­
ings and investment plan that offers
you the same type of savings and tax
benefits that many private corporations
offer their employees under 401(k)
plans. By participating in the TSP, you
have the opportunity to save part of
your income for retirement, receive
matching agency contributions, and
reduce your current taxes.
Your thrift account is the part of your
retirement that you control — you
decide how much of your pay to put in
your thrift account, how to invest it,
and, when you retire, you decide how
you want your money paid out.
The best way to assure that your retire­
ment income meets your needs is to
start investing in the Thrift Savings
Plan at the beginning of your Federal
service, and to continue to do so
throughout your career. This is your
way to invest in your own future — to
invest in yourself. It is particularly
important for higher-paid employees to
save enough through the TSP since
Social Security replaces less income of
higher-paid workers than it does for
lower-paid workers.
12
Additional information about the bene­
fits and features of the TSP has been
issued by the Federal Retirement Thrift
Investment Board and is available from
your agency employing office or the
TSP Web site (www.tsp.gov). In addi­
tion to the “Summary of the Thrift Sav­
ings Plan for Federal Employees” (stock
number TSPB08), separate booklets on
the loan program, withdrawal options,
and annuities are available.
Eligibility
All Federal employees covered by FERS
are eligible to participate in the Thrift
Savings Plan (TSP). However, if you are
a newly hired FERS employee, you
must wait a certain period of time —
generally, 6 to 12 months — before you
can begin to participate in the TSP. If
you are a rehired FERS employee, when
you can begin to participate in the TSP
depends upon your previous TSP eligi­
bility.
See the “Summary of the Thrift Savings
Plan for Federal Employees” for the
specific rules on TSP eligibility, or ask
your personnel office when you will
become eligible to participate in the
plan.
Contributions
Once you become eligible to participate
in the Thrift Savings Plan, there are
three types of contributions that may
be made to your account:
[ Agency Automatic (1%) Contribu­
tions
[ Employee Contributions
[ Agency Matching Contributions
Agency Automatic (1%) Contribu­
tions
Your agency will set up a Thrift
account for you and will automatically
contribute an amount equal to 1% of
your basic pay each pay period. These
Agency Automatic (1%) Contributions
are not taken out of your salary, and
your agency makes these contributions
whether or not you contribute your
own money.
Employee Contributions
You may make your own contributions
by payroll deductions. The money you
contribute is taken out of your pay
before Federal and, in almost all cases,
State income taxes are calculated. You
may contribute up to 10% of the basic
pay you earn each pay period up to the
Internal Revenue Service (IRS) limit,
which is $10,000 in 1998. (This limit
may be adjusted each calendar year
according to the Internal Revenue
Code.)
13
Agency Matching Contributions
When you make employee contribu­
tions, your agency will make match­
ing contributions to your TSP
account according to the following
schedule:
Contribution
Your Agency
Match
First 3% of Basic $1.00 for each
Pay $1.00 you con­
tribute
Next 2% of Basic $0.50 for each
Pay $1.00 you con­
tribute
Next 5% of Basic 0
Pay
The agency contributions are not taken
out of your salary; they are an extra
benefit to you. While your agency will
only provide matching contributions on
your contributions up to 5% of your
basic pay each pay period, you still
benefit from before-tax savings and
tax-deferred earnings on amounts you
contribute in excess of 5% of your basic
pay each pay period.
The examples at the end of this booklet
illustrate the importance of Thrift Plan
participation in your total benefits
package. The examples also show the
effect on a FERS retirement package of
contributing 3% of pay and 5% of pay .
Vesting Requirement
When you separate from Federal serv­
ice, you must meet the Thrift Plan vest­
ing requirement to be entitled to, or
vested in, your Agency Automatic (1%)
Contributions and attributable earn­
ings. For most employees, this vesting
requirement is 3 years of Federal, gen­
erally civilian, service.
Congressional employees and certain
other non-career employees must com­
plete 2 years of Federal, generally civil­
ian, service. Employees who die in
service are automatically vested in
their Agency Automatic (1%) Contribu­
tions.
You are immediately vested in your
own contributions and your Agency
Matching Contributions and in the
earnings attributable these contribu­
tions.
Investment Options
There are three Thrift Savings Plan
investment Funds. The Funds differ in
the rate of return and amount of risk
involved. You may invest any percent­
age of future contributions to your
account in any of the three investment
Funds. You can also transfer any por­
tion of your existing account balance
among the three Funds.
The three Funds are described briefly
below. For more detailed information
about these Funds, see the “Summary
of the Thrift Savings Plan for Federal
Employees” or the “Guide to TSP
Investments.”
Government Securities
Investment (G) Fund
The G Fund consists of investments in
short-term non-marketable U.S. Treas­
ury securities specially issued to the
Thrift Savings Plan. All investments in
14
the G Fund earn interest at a rate that,
by law, is equal to the average of mar­
ket rates of return on U.S. Treasury
marketable securities outstanding with
4 or more years to maturity. There is
no credit risk for G Fund securities
because they are guaranteed by the
U.S. Government.
Common Stock Index Investment
(C) Fund
The C Fund is invested in a Standard &
Poor’s 500 (S&P 500) stock index fund,
that is made up of the common stocks
of all of the companies represented in
the S&P 500 index. The C Fund gives
participants the opportunity to diver­
sify their investments by investing
broadly in the U.S. stock markets and
to earn the relatively high investment
returns stocks sometimes provide. The
risk of investing in the C Fund is that
the value of stocks can decline sharply,
resulting in losses.
Fixed Income Index Investment
(F) Fund
The F Fund is invested in a bond index
fund that tracks the performance of the
Lehman Brothers Aggregate (LBA) bond
index. The bond index consists primar­
ily of high quality fixed-income securi­
ties representing the U.S. Government,
corporate, and mortgage-backed securi­
ties sectors of the U.S. bond market.
The F Fund offers the opportunity for
increased rates of return in periods of
generally declining interest rates. The F
Fund carries credit risk and market risk
and, thus, has potential for negative
returns that can result in losses.
Contributing to TSP
To begin contributing to the Thrift Sav­
ings Plan, you must complete an Elec­
tion Form (TSP- l) and submit it to your
agency employing office during a TSP
open season. There are two open sea­
sons each year — May 15 to July 31
and November 15 to January 31.
Tax Advantages
There are two major tax advantages to
the Thrift Savings Plan (TSP). First, you
pay current Federal income taxes on
your salary after your TSP contribu­
tions have been deducted. Second, you
do not pay current Federal income
taxes on the earnings you receive on
your TSP account balance. Most states
allow the same pre-tax and tax
deferred savings on their income taxes.
These tax advantages continue until
you withdraw your account balance —
usually at retirement when your tax
bracket may be lower. If you leave Fed­
eral service before you are eligible to
retire, you may transfer your account
balance to an Individual Retirement
Arrangement Account or other eligible
retirement plan and continue to defer
taxes.
15
Loan Program
If you have at least $1,000 of your own
contributions (including attributable
earnings) in your account you may bor­
row from it.
There are two types of loans: general
purpose, which does not require you to
document or specify the purpose of
your loan, and residential, which is
only for the purchase of a primary resi­
dence and requires documentation.
You pay interest on the loan at the
G Fund rate in effect at the time your
application is received. Both the princi­
pal and the interest you pay go back
into your own TSP account. See the
booklet “Thrift Savings Plan Loan Pro­
gram” for more information about the
TSP loan program.
Withdrawing Your Funds
The Thrift Savings Plan is a long-term
plan for retirement savings with special
tax advantages. Generally you cannot
withdraw your TSP account until you
separate from Federal service.
Withdrawal Options
After you separate from Federal service,
there are three basic ways to withdraw
your account:
[ Have the TSP purchase a life annu­
ity for you.
[ Receive your account in a single
payment.
[ Receive your account in a series of
monthly payments.
You can have the TSP transfer all or a
part of a single payment or, in some
cases, a series of monthly payments, to
an Individual Retirement Arrangement
or other eligible retirement plan.
Leaving your money in the
TSP
If you do not want to withdraw your
account when you leave Federal serv­
ice, you can leave your entire account
balance in the Thrift Savings Plan.
However, you must withdraw your TSP
account or begin receiving monthly or
annuity payments by April 1 of the
year following the year you reach
70 1/2.
16
Automatic Cashout
After you separate from Federal service,
if your vested account balance is
$3,500 or less, your entire account will
be paid to you automatically in a single
payment unless you elect another with­
drawal option or to leave your money
in the Thrift Savings Plan. The TSP will
notify you before automatically cashing
out your account and allow you the
opportunity to elect as specified above.
Additional information
See the booklet, “Summary of the
Thrift Savings Plan for Federal Employ­
ees,” or the booklet, “Withdrawing
Your TSP Account After Leaving Fed­
eral Service” (stock number TSPBK02),
both issued by the Federal Retirement
Thrift Investment Board, for more
information about withdrawal options.
Special Groups
of Employees
Firefighters, Law
Enforcement Officers, and
Air Traffic Controllers
These groups of employees receive an
unreduced benefit at age 50 with 20
years of service, or at any age with 25
years of service. If you are in one of
these employee groups, you contribute
an additional .5% of pay to the Federal
Employees Retirement System (FERS).
Your annual annuity is:
1.7% of your high-3 average pay
times
20 years of service
plus
1.0% of your high-3 average pay
times
years of service exceeding 20.
You also receive a Special Retirement
Supplement until age 62 that approxi­
mates the Social Security benefit
earned in Federal service. After you
reach the Minimum Retirement Age
(MRA), if you have earnings from
wages or self-employment that exceed
the Social Security annual exempt
amount, your supplement will be
reduced or stopped. In addition, you
are entitled to an annual Cost-of-Living
Adjustment (COLA), regardless of your
age.
17
Military Reserve
Technicians
If you are a military reserve technician
who loses the military status required
to maintain your position, you may
retire and receive an unreduced annu­
ity if you are at least age 50 with 25
years of service.
In addition, a Special Retirement Sup­
plement is payable until age 62. After
you reach your Minimum Retirement
Age (MRA), if you have earnings from
wages or self-employment that exceed
the Social Security annual exempt
amount your supplement will be
reduced or stopped.
Part-Time Employees
In calculating the annuity for employ­
ees with part-time service, the average
high-3 consecutive years of pay will be
based on the full-time pay rate. The
benefit based on the full-time rate is
reduced according to the part-time
schedule.
Members of Congress and A Special Retirement Supplement is
payable from the Minimum Retirement
Congressional Employees Age to age 62. If you have earnings
from wages or self-employment that
Members of Congress receive an unre­
exceed the Social Security annual
duced annuity at age 50 with 20 years
exempt amount, your supplement will
of service, or at any age with 25 years
be reduced or stopped.
of service. Congressional employees
must meet the age and service require­
Cost-of-Living-Adjustment’s (COLA’s)
ments explained in the Basic Benefit
are payable to Congressional retirees
Plan section.
before age 62 only if they retire for dis­
ability.
If you are a Member of Congress or a
Congressional employee, with at least 5
Members of Congress and Congres­
years of Congressional service, your
sional employees contribute an addi­
annuity will be:
tional .5% of pay to the Federal
Employees Retirement System (FERS).
1.7% of high-3 average pay
times
years of Congressional service
up to 20
plus
1.0% of high-3 average pay
times
any other service.

18
Enrolling in FERS
New Employees
Most new employees hired after
December 31 1983, are automatically
covered by the Federal Employees
Retirement System (FERS). The excep­
tions are employees in appointments
that are limited to 1 year or less, most
intermittent employees, anyone who is
not eligible for Social Security cover­
age, or certain persons with non-
Federal service which is creditable
under the Civil Service Retirement
System (CSRS).
Rehires and Conversions
The general rules on whether you are
covered by CSRS, CSRS Offset, or FERS
after a break in service or conversion
from one type of appointment to
another are stated below. Just how
those rules apply to you must be deter­
mined by your personnel office.
If you leave Federal Government serv­
ice and return within 1 year and you
were previously covered under CSRS
(without Social Security), then you will
generally be covered by CSRS upon
reemployment. However, you may elect
within 6 months of reemployment to
transfer to FERS, in which case you
will also be covered by Social Security.
If you leave Federal Government serv­
ice and return after more than 1 year
and you were previously covered under
CSRS, then you are automatically cov­
ered by Social Security and:
19
[ If you have less than 5 years under
CSRS, you are automatically cov­
ered by FERS.
[ If you have 5 or more years under
CSRS, you are covered by CSRS Off­
set. Your CSRS contributions are
reduced by 100% of your Social
Security Old-Age, Survivor Disabil­
ity Insurance (OASDI) fund taxes.
Your CSRS benefit will be offset by
any Social Security benefit attribut­
able to your Federal service.
In determining whether you have 5
years of service which is creditable
under CSRS, count all civilian service
as of your last separation from service,
even though it may not have been cov­
ered by CSRS deductions, or you may
have received a refund of CSRS deduc­
tions. You will receive credit for your
CSRS service if you make any payments
for your past service that may be
required.
Even if you were never covered by
CSRS, you are eligible for CSRS Offset
coverage if you had 5 years of credit­
able civilian service before January 1,
1987.
If you are rehired under CSRS or CSRS
Offset, you may elect to transfer to
FERS within 6 months of reemploy­
ment. If you elect to transfer to FERS,
the following rules apply.
[ Your credit in CSRS is frozen, but
your combined CSRS and FERS
annuity will be based on the aver­
age of your highest 3 consecutive
years of pay.
[ You will receive a full Civil Service
Retirement System (CSRS) cost of
living adjustment on the CSRS por­
tion of your annuity.
[ Your service after the date of trans­
fer is treated under the Federal
Employees Retirement System
(FERS) rules. (If you were under
CSRS Offset, your offset service is
also treated under rules.) In addi­
tion, all of your service is treated
under FERS rules if you have less
than 5 years of non-Offset CSRS
service when you transfer.
[ All service (CSRS and FERS) counts
toward years needed to be eligible
for retirement, disability, survivor,
and Thrift Saving Plan benefits
under FERS.
[ All survivor and disability benefits
are paid under FERS rules.
20
[ Unused sick leave is credited under
CSRS rules based on the amount
accumulated at the date of transfer
or date of retirement, whichever is
lower.
[ You have Social Security coverage
when you enroll in FERS.
[ You will receive Government contri­
butions to your TSP account and
avoid the 6-12 month waiting
period for participation.
If you are converted from an appoint­
ment that is excluded from FERS cover­
age to an appointment that is not
excluded, generally you will automati­
cally be covered by FERS. If you are not
automatically covered by the plan, you
will have a 6-month opportunity to
transfer to it.
Note: If you are eligible to elect FERS
coverage because of being rehired or
converted to a different appointment,
you should read the FERS Transfer
Handbook — A Guide To Making Your
Decision, RI 90-3, before making a
decision. Your personnel office should
provide it to you.
Examples
The following examples illustrate the
annual benefits that you can expect to
receive under the Federal Employees
Retirement Sytem (FERS). In reviewing
these examples, note that the benefits
shown are estimates based upon cer­
tain assumptions about future salary
increases, investment returns, and
other factors that directly affect your
final level of benefits.
Keep in mind the following features of
specific benefit components:
[ Two types of FERS benefits are
shown. The “FERS basic benefit” is
your regular annuity based on total
years of service and your high-3
average salary. The “special supple­
ment” is a substitute for Social
Security that may be payable to you
from when you retire under FERS
until age 62. In most cases your
actual Social Security benefit at age
62 will be higher than the FERS
supplement you receive before age
62.
[ Estimated Social Security benefits
do not include any spousal or
dependent benefits that may be
available. These additional pay­
ments could significantly increase
the total value of your Social Secu­
rity benefits.
[ Estimated benefits from the Thrift
Savings Plan are shown in terms of
a “single life annuity” purchase
21
with your account when you
retire. The annuity includes 3%
annual cost-of-living adjustments
to help protect its purchasing power
during your retirement years. These
projected benefits are based on
career-long investments at the
stated percentages of pay. Your
actual Thrift Savings Plan benefits
will depend on your account’s
investment earnings and the spe­
cific payment form you elect when
you retire.
Examples 1 and 2 are good illustra­
tions of how Social Security provides a
larger percentage of income to lower
income employees than to higher
income employees. Example 2 also
shows that the higher income employee
needs to save more in his TSP account
to receive the same percentage of his
final salary as the lower paid employee
in example 1.
All benefits are shown in 1996 dollars.
Annual benefits have been rounded to
the nearest hundred dollars and per­
centages may not total exactly due to
rounding. The economic assumptions
used to create these examples are:
Inflation 3.5%
All wages 3.5%
Federal wages 3.5%
Nominal Interest 7.5%
Real Interest 4.0%
Example 1. Anne

Main Features:

[ FERS coverage begins at age 25 in 1996

[ Retirement at age 57 with 32 years of service in 2028
[ Entry at Grade 3, Step 1
[ Retirement at Grade 7, Step 10, salary $32,600
[ 3% Thrift Savings Plan contribution (plus 4% from agency)

Anne’s estimated retirement benefits at age 57 under FERS are:

As % of Final Year’s
Initial FERS Benefit Dollar Amount
Salary
Basic FERS Annuity $9,600 29%
Special Supplement $6,200 19%
Thrift Savings Plan $6,600 20%
Total Annual Benefits $22,300 69%

The special annuity supplement is payable until age 62. Anne’s regular Social
Security retirement benefits starting at age 62 would be about $7,200 — 22% of
her final salary.

If Anne had contributed 5% of her salary to the Thrift Savings Plan, rather than 3%,
her yearly Thrift Savings Plan benefit would have been $9,400. This would
increase Anne’s total initial FERS benefit to $25,200 per year — 77% of her final
yearly salary of $32,600.

22
Example 2. Bob

Main Features:

[ FERS coverage begins at age 25 in 1996

[ Retirement at age 57 with 32 years of service in 2028
[ Entry at Grade 7, Step 1
[ Retirement at Grade 13, Step 10, salary $68,700
[ 3% Thrift Savings Plan contribution (plus 4% from agency)

Bob’s estimated retirement benefits at age 57 under FERS are:

As % of Final Year’s
Initial FERS Benefit Dollar Amount
Salary
Basic FERS Annuity $20,200 29%
Special Supplement $8,800 13%
Thrift Savings Plan $12,700 18%
Total Annual Benefits $41,700 61%

The special annuity supplement is payable until age 62. Bob’s regular Social Secu­
rity retirement benefits starting at age 62 would be about $10,500 — 15% of his
final salary.

If Bob had contributed 5% of his salary to the Thrift Savings Plan, rather than 3%,
his yearly Thrift Savings Plan benefit would have been $18,100. This would
increase Bob’s total initial FERS benefit to $47,100 per year — 69% of his final
yearly salary of $68,700.

23
Example 3. Charles

Main Features:

[ FERS coverage begins at age 40 in 1996

[ Retirement at age 60 with 20 years of service in 2016
[ Entry at Grade 7, Step 1
[ Retirement at Grade 12, Step 8, salary $54,800
[ 3% Thrift Savings Plan contribution (plus 4% from agency)
[ 15 years prior Social Security
[ Final pre-Federal salary $23,500

Charles’s estimated retirement benefits at age 60 under FERS are:

As % of Final Year’s
Initial FERS Benefit Dollar Amount
Salary
Basic FERS Annuity $9,900 18%
Special Supplement $4,900 9%
Thrift Savings Plan $5,500 10%
Total Annual Benefits $20,300 37%

The special annuity supplement is payable until age 62. Charles’s regular Social
Security retirement benefits starting at age 62 would be about $9,700 — 18% of his
final salary. (They include his pre-Federal employment.)

If Charles had contributed 5% of his salary to the Thrift Savings Plan, rather than
3%, his yearly Thrift Savings Plan benefit would have been $7,900. This would
increase Charles’s total initial FERS benefit to $22,700 per year — 41% of his final
yearly salary of $54,800.

24
Example 4. Donna

Main Features:

[ FERS coverage begins at age 25 in 1996

[ FERS service ends at age 45 in 2016

[ Deferred benefit at MRA with reduction

[ Entry at Grade 7, Step 1

[ Separation at Grade 12, Step 8, salary $54,800

[ 3% Thrift Savings Plan contribution (plus 4% from agency)

[ 17 years work after leaving government

Donna can begin receiving deferred FERS benefits at age 62. She also can begin
receiving them as early as age 57, which is her Minimum Retirement Age. If she
receives them at age 57, they are reduced 5% per year that she is under age 62 — a
25% reduction.

Donna’s estimated retirement benefits at age 57 under FERS are:

As % of Final Year’s
Initial FERS Benefit Dollar Amount
Salary
Basic FERS Annuity $4,900 9%
Special Supplement $0 0%
Thrift Savings Plan $8,100 15%
Total Annual Benefits $13,000 24%

Donna does not receive the special annuity supplement. Donna’s regular Social
Security retirement benefits based on her Federal employment starting at age 62
would be about $11,000 — 20% of her final salary. However, since she continued
working elsewhere, her age 62 Social Security benefit is based on the cumulative
total benefit she earned.

If Donna had contributed 5% of her salary to the Thrift Savings Plan, rather than
3%, her yearly Thrift Savings Plan benefit would have been $11,500. This would
increase Donna’s total initial FERS benefit to $16,400 per year — 30% of her final
yearly salary of $54,800.

25
For More
Information
There are several sources of assistance
if you have questions or want more
information about the components of
your benefits package.
[ Your Agency's Personnel Office—
in your agency for questions con­
cerning your individual situation.
Your personnel office has your
records and is in the best position
to answer questions about the basic
benefit and TSP rules. In addition, it
should have the following publica­
tions to help answer questions.
Publications of the Federal Retire­
ment Thrift Board:
Website — http://www.tsp.gov
& Summary of the Thrift Savings
Plan for Federal Employees
(TSPBK08)
& Investments: Options and
Operations (TSPBK03)
& Thrift Savings Plan Loan
Program (TSPBK04)
& Annuities (TSPBK05)
& Withdrawing Your TSP Account
After Leaving Federal Service
(TSPBK02)
& Information About Court Orders
(TSPBK11)
Publications of the U.S. Office of
Personnel Management:
26
Website — http://www.opm.gov
& Information for Separating
FERS Employees Who Are Not
Eligible for an Immediate Annu­
ity, RI 90-11
& Information about Reemploy­
ment for FERS Annuitants,
RI 90-18
& Court-Ordered Benefits for
Former Spouses Under CSRS,
FERS, FEHB, and FEGLI,
RI 84-1
& Work-Related Injuries and
Fatalities — What You and
Your Family Need to Know
About Your Benefits, RI 84-3
& Life Events and Your Retire­
ment and Insurance Benefits
(For Employees), RI 84-3
& Temporary Continuation of
Coverage (TCC) under the
Federal Employees Health Bene­
fits Program, RI 79-27
& FEGLI Booklet, RI 76-21
& Thinking About Retirement?,
RI 83-11
[ Social Security Administration —
for questions concerning your
Social Security benefits. You may
call (800) 772-1213 with questions
or to request a copy of your earn­
ings record and estimated future
benefits.
Website — http://www.ssa.gov
 Retirement
Retirement &
& Insurance Service
Insurance Service

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